Heather Stewart, writing for the British paper The Observer, has written an insightful piece into the effects of oil and its tax revenues on the African continent. Below are excerpts:
For the first time in decades, though, there is some reason to hope that a better model is emerging that may be more successful in bringing the benefits of Africa’s extraordinary endowments to the people who need them most. And it comes at a critical time, when countries such as Ghana, Kenya, Mozambique, Uganda and Tanzania are starting to exploit recently discovered reserves of oil and minerals.
[A] small but growing number of African countries are starting to try a different way of doing business with the drilling firms that come knocking – and a more considered way of spending the proceeds.
But at an event organised by Oxfam and Oxford University last week to examine resource extraction in Africa, Tony Venables, of the university’s centre for the analysis of resource-rich economies, stressed that the priorities of developing countries’ governments should be different. They needed to focus on spending money at home, building up domestic infrastructure such as roads and power networks – which in turn would help to complement more private-sector investment – instead of squirrelling away the revenues overseas.
Ricardo Soares de Oliveira, an academic who has spent more than 15 years studying the impact of natural resource extraction in Africa, argued that some of the countries that had only recently discovered reserves of oil or minerals perhaps had a better chance of reaping the benefits than those with a long and tangled history of oil politics.
Of course, not everyone is optimistic: Dereje Alemayehu, chair of the Global Alliance for Tax Justice, argued that there were still far too many opportunities for corrupt officials to shield their money offshore in tax havens. And Venables pointed out that if the proceeds of resource extraction were to be effectively spent to the benefit of the public, that would require an effective state – not least a strong treasury and clued-in tax collectors.
Finally, the commodities “supercycle”, as it has been called, won’t last for ever: prices have already weakened on world markets in some areas as investors come to terms with the fact that demand from China will not rise at the rampant pace of recent years indefinitely.
In fact, perhaps the most important insight from Thursday’s thinkfest was that the countries that will be proven most successful in managing their natural resources wealth may be those that use the dividends to help them develop their productive capacity in other sectors, and build diversified economies that will still be creating jobs and exports long after the wells have run dry.
Recommend reading the full article at: http://www.theguardian.com/business/2013/oct/27/african-nations-oil-blessing-not-curse
- African nations seek ways to make oil a blessing, not a curse (theguardian.com)
- World Bank Admits: ‘Economic Growth’ in Africa = Resource Extraction, Inequality, Poverty (rinf.com)
- World Leaders In South Africa For Economic Conference (eurasiareview.com)
- How Kenya can make the most of its oil and gas find (nation.co.ke)